Affirm: Max Levchin (Part 2 of 2)

After PayPal sold to eBay in 2002, Max Levchin could have relaxed on a beach for the rest of his life. But that’s not the kind of person he is. He isn’t happy unless he’s coming up with new ideas and building companies – so much so that he actually fell into a dark place after leaving PayPal. He didn’t fully find himself until years later, when he rediscovered his passion for the “hard, valuable, fun” problems of fintech. Now, Max runs another billion-dollar company: Affirm, a “buy now, pay later” service that’s transforming how we purchase things on credit. This is the second part of a two-part conversation with Max; to hear the story of PayPal, be sure to listen to part 1! See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan,

• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

  Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get The US Bank Triple Cash Rewards Visa Business Card.

• 2:14Guy Raz?

  Now you're earning 3% cash back on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association pursuant to a license from Visa USA Inc. Some restrictions apply. If you travel often, you'll want to hear about this unprecedented offer.

• 2:58Guy Raz?

  For the first time ever, new Delta SkyMiles Reserve American Express Card members can earn two Delta Comfort round trip flights for travel within the 48 contiguous US states, Puerto Rico, or the US Virgin Islands. Plus, you can earn 50,000 bonus miles towards your next getaway. And who doesn't appreciate an elevated airport experience? Delta SkyMiles Reserve Card members get access to the Delta Sky Club, your pre-flight oasis to recharge with 15 visits and four one-time guest passes each medallion year when flying Delta together. That's up to $950 in annual value.

• 3:40Guy Raz?

  Value estimate based on $50 per visit rate to purchase additional visits or bring a guest to the Delta Sky Club. Make every trip feel more rewarding with the card that upgrades your travel. Apply today at delta.com/cardsocial. Offer ends November 4, 2026. Minimum spending requirements and terms apply. Flights are fulfilled as flight certificates valid for Delta Comfort or Delta Maine to select domestic destinations. Book 21-plus days in advance. Up to $80 per person and taxes and fees apply. Other restrictions apply. When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering. I'm thinking about getting in, filling up, and getting on with my day.

• 4:23Guy Raz?

  And it reminds me a little bit of the founders I talked to on this show, because the best ones obsess over things their customers will never see. Tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile regular gas in port fuel-injected engines. Actual results may vary.

• 5:07Guy Raz?

  Visit mobili fuels.com for details.

• 5:12Speaker 01

  As we were brainstorming ideas, the first filter I would apply is what is sort of gut-wrenchingly difficult that just people are willing to go to the ends of earth to figure out? And I said, credit scoring is such a gnarly problem. I still brace for impact every time I hand my credit card over, because who knows, they might cut it up and bring it to me in two pieces because my credit is so bad. And it was sort of this like, oh, that's really hard. There's a lot of people like me who screwed up in college and probably would like to buy things using credit, but have these horrendous triple-digit rates they have to deal with. So that was the jump-off point. And we went to work feverishly.

• 6:00Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:12Guy Raz?

  I'm Guy Raz, and on the show today, how Max Levchin regained his sense of purpose after losing himself in the long shadow of PayPal and eventually built a firm, another multi-billion-dollar fintech company that's changing how we buy things on credit.

• 6:36Guy Raz?

  I love every conversation I have with founders for this show. I learn so many things from each interview. And as a team, we spend a lot of time trying to find founders who've built brands that have had some kind of wider cultural impact. But most importantly, we look for founders who are willing to be open. Because really, what I'm asking each founder is to share his or her story in the hope that you, you, the person listening, will benefit from it. And in some ways, Max Levchin could be the poster child for this mission, in part because Max is obsessed with solving hard problems.

• 7:16Guy Raz?

  So much so, he named his tech incubator HVF, which stands for Hard, Valuable, and Fun. Not only was he a key founder and developer at PayPal, but he went on to have a hand in the founding of Yelp, Glow, which is a suite of apps around fertility and pregnancy, and now Affirm. It's a platform that allows you to buy millions of products by splitting up the payments into equal installments. This is one of those rare "How I Built This" episodes where the interview went on for such a long time, and the interviewee was filled with so many great stories and insights, that we broke it up into two episodes. And if you missed last week's episode, please go back and start there before continuing

• 8:01Guy Raz?

  with this one. Last week, we heard about the origin story of PayPal and all the characters who helped build it, including Reid Hoffman, Peter Thiel, and Elon Musk. PayPal eventually sold to eBay for $1.5 billion. But after walking away with a significant chunk of money, Max was bored. He wasn't going to sit on a beach for the rest of his life. He needed a new hard problem to solve. And so he started to explore. He first went down the social media rabbit hole with a product he built called Slide, before he landed on a new idea, an idea to make it easier for people to buy products on credit without punishing interest rates and late fees.

• 8:46Guy Raz?

  Over the past 10 years, Affirm has grown to become one of the country's most highly rated brands in what's known as the buy now, pay later sector. But for now, let's pick up the story where we left off last week. It's around 2002, 2003, and Max has walked away from PayPal with a reported $34 million. But he's having what he describes as the worst year of his life. He feels rudderless, he's just sitting around his apartment in his pajamas and waiting for something to happen. And to make matters worse, his then-girlfriend, Nellie, has just broken up with him.

• 9:24Speaker 01

  Yep. She basically said, "You're insufferable. Go figure out what you want to be. I'm pretty sure we're going to get back together, but you're impossible to be with. Go away and be on your own for a little while."

• 9:36Guy Raz?

  Did you ever want to be a 27-year-old with some money and get an awesome car and get a great place to live and just blow some cash? Did you ever do any of that?

• 9:50Speaker 01

  I attempted a poor excuse for that right after she broke up with me. I always wanted to live in a loft. Somehow, I was obsessed with this idea of extremely high ceilings. So I got this loft south of Market in San Francisco, and I decided to learn how to DJ. I think I was trying to call myself DJ irate. I'll leave it to the reader to understand what that meant. But I took a bunch of lessons, got some equipment, and then started inviting my nerdy PayPal friends to come to my loft and have dance parties. And I had like two or three, and then the neighbors complained.

• 10:32Speaker 01

  And I was like, wow, this is quite a different level of misery. Probably shouldn't be doing this. And then I decided this whole thing was kind of silly, and I stopped.

• 10:41Guy Raz?

  No shame. We've all done things in our youth that are important. You need to do those things. You need to live those experiences to be able to reflect on them. But it sounds like one of the things that you actually did do at that time was to use some of your money to create like an incubator, right? Called MRL Ventures. You did this with, I guess you got some backing from Peter Thiel.

• 11:08Speaker 01

  Yeah, exactly. So right around the DJ phase. I realized that basically the only way out of the pit of despair was to work. Like, I wasn't going to be happy with just more money or cars or anything, really. And I was missing my girlfriend desperately, so I was sort of like, well, I need to, I need to return to some kind of notion of what I was when she thought I was okay. And I basically said, well, kind of, what's the essence of work for me? Like, I can write code, but I don't seem to be motivated, and I can brainstorm product ideas, but it just, nothing's on the whiteboard, what's going on? And I sort of went back in my mind to the early days of PayPal, and sort of the happiest

• 11:47Speaker 01

  moments was Luke and Kenny bought all these really cheap whiteboards, and we would just fill it with ideas, and some of the ideas were completely insane, but that was like intellectual fountain of just craziness and creativity and cool. And so basically, I decided what I need is to rent an office that I could mount lots of whiteboard on the walls and just start brainstorming and bring in some people that I love brainstorming with, and something good will come out of it. And so it was less a formal incubator and more of a, I need to pack a room with brilliant minds and something will happen. And as we started doing this, it actually, very, very quick, that cool ideas started to appear, and it's like, wow, what I really need is a structure and maybe some engineers

• 12:32Speaker 01

  to start prototyping things. And so it evolved as opposed to was created.

• 12:36Guy Raz?

  So you got some office space in Soma, and we heard about this when we did our episode on Yelp with Jeremy Stopelman, who you had met through the merger. He became like one of the people that you brought in to come up with an idea, and he had this idea for like a review website. When you heard that idea, was it immediately in your mind, like, yeah, let's do it. This sounds great, I'm, you know, let's go for it.

• 13:01Speaker 01

  Yes, actually, this may be the only time in my life that I had sort of jumped off a cliff without checking if there's water. So I had already gotten back together with then-girlfriend, now-wife, who had graciously took me back after, I think we stayed apart for maybe six weeks, by the way, so this was not like a true long. Separation or anything, but my spirits were suddenly very much up because the love of my life was was willing to have me again. And I was coming to work and I was brainstorming and my whiteboard was filled with ideas. And Russ, who was my chief architect at PayPal and Jeremy, who was my VP of Engineering at PayPal,

• 13:44Speaker 01

  were hanging out in the space and brainstorming kind of all the time. They're kind of in this corner together, talking about all these various ideas around local search. And they pitched me on what became Yelp. And entirely on a whim, I basically said, I will buy as much of this company as you'll sell me for a million dollars. And I don't think I've ever done that before or after.

• 14:04Guy Raz?

  Yeah, it was a great, great fortunate decision because I think you got about 11% of the company.

• 14:10Speaker 01

  By the time of the IPO, yes, but in the moment it was much more since there was really nothing.

• 14:16Guy Raz?

  Meantime, this incubator was also a place where you could come up with your own new idea. And and the idea that you eventually land on was a company called Slide. For people who don't remember what it was, can you just briefly describe what Slide did?

• 14:32Speaker 01

  It did a lot of things in their analysis problem. The very original idea was this realization that I had that content online will start to become more like TV, where you do nothing and just content washes over you. And this is before YouTube. So this idea of video on demand on your desktop just wasn't a thing yet. And video, by the way, was very, very expensive to stream and to host and to encode. And so I thought, all right, so video isn't a thing yet and maybe it won't be a thing for a while. But what's the closest thing to a video that people could interact with it the same way they they interact with TV,

• 15:11Speaker 01

  where you get news and you get content and you get beautiful images and maybe ultimately get advertising and that's how you monetize it. And so I come up with this idea of a kind of an application that sits on your desktop in a corner, like sort of a teep that just scrolls images of things and goods and advertisements and stories and news. And you get to configure it. And it was inspired in a way by a much earlier company that died in the dot com crash called the Point Cast.

• 15:38Guy Raz?

  Right.

• 15:39Speaker 01

  I remember obsessing over what Point Cast was and what it did wrong, what it did right. And eventually I decided they did nothing wrong. They were just too early.

• 15:47Guy Raz?

  So your idea was basically to create a way to share photos and videos that was going to be easier and nicer and more user friendly?

• 15:57Speaker 01

  Yes, it was primarily about personal photo sharing. So it was very clear that regular people, people that don't really care about cryptography and complex problems are going to start flooding onto the internet. And I started, well, if the world of the internet becomes suddenly very social, there are all these humans that are emotional, what will they do? What will they need? They're all going to just follow the seven deadly sins because that's what humans do. We're all wired to transgress in sinful ways. And so I wrote down the seven deadly sins and said that my motto will be, "One startup for every deadly sin." I remember reading or hearing the quote, "Vanity is the devil's favorite sin."

• 16:40Speaker 01

  So I thought, well, what does vanity look like online? It has to be media sharing, it has to be photo sharing, it has to be video sharing. And so Slide was very much invented through this intellectual rigorous attempt to figure out what will people do once vanity becomes the dominant behavioral force online.

• 16:58Guy Raz?

  Yeah, I mean remarkably prescient because that of course did happen, but probably we're just a little bit too early, right? Because I was thinking about this just the other day, looking at Instagram, and so many Instagram accounts are just people taking photos of themselves, right? Social media is really, I mean, something we would have called vanity a few years ago is just normal now, right?

• 17:21Speaker 01

  Yeah.

• 17:22Guy Raz?

  To call it vanity is almost weird. People will be like, what do you mean? It's vain for me to put photos of myself on my account. That's what everybody does. But you were a little bit early on that.

• 17:33Speaker 01

  Yeah, probably, a good decade.

• 17:34Guy Raz?

  Yeah. What was it about this idea that appealed to you? I mean, this is very different from what you had been doing, not just a PayPal, but just like, it was different from your interests and like cryptography and just like really intense like mathematical problems and this is like consumer photos. What was it about that appealed to you?

• 17:58Speaker 01

  I think you just answered the question yourself. Part of my existential crisis was I was super successful building a payment system at 27. And all I knew was how to secure things, which mostly you secure money. And I knew about payments and I knew about banking now and I knew how to fight fraud and all kinds of really intense things. How could I top that? You know, in my 30s, how was I going to build a better PayPal?

• 18:28Guy Raz?

  And really, from what I've read, it sounds like you were motivated by this idea of like, you wanted to make something that was bigger than PayPal. Because to you PayPal was, you could measure it by a number, 1.5 billion. And in your mind, it wasn't about the money, it was about surpassing that number. So you could feel like you created something on your own. PayPal wasn't your, like, the peak of your career.

• 18:51Speaker 01

  Yeah, that was certainly a significant motivation. I'm not sure I was explicitly comparing it in terms of the sort of exit number. But I definitely thought of how many people will use this thing? And how valuable would it be for some definition of value? And so absolutely it was a, how can I one up my younger self?

• 19:09Guy Raz?

  I read that around this time, you were, again, you were quoted as saying, "I don't know what I would do if I couldn't start companies. I'd probably slit my wrist, oh my gosh, Max." But really, I mean, that was, and to some extent is, as we will continue to talk about your story, is your motivating force. There's a restlessness, right? Like, you do have this restlessness.

• 19:38Speaker 01

  Yeah. Starting companies is clearly the thing that gets me going.

• 19:42Guy Raz?

  All right, so Slide becomes your idea. And did you go out and raise money for it right away?

• 19:51Speaker 01

  Pretty much. I think the original idea was that Peter and I funded it. And then fairly soon thereafter, I sort of went out and raised a, quote unquote, "proper financing round." And this time, I had a brand name to bring to San Hill Road. So lots of San Hill Road firms were excited to participate. And we were off to the races.

• 20:12Guy Raz?

  Slide was a, can you tell me what it was like as a consumer? How, what would my experience be with it? What would I do with it?

• 20:20Speaker 01

  So by the time Facebook started really growing explosively and MySpace was still a thing, we'd really kind of nailed this one use case. It's exactly as you mentioned. Most photos people post online are of themselves. And so we had basically evolved the product to be just a really beautiful way of showcasing your own photos. And instead of sharing them to a specific individual, you just broadcast them to anybody who would come to your MySpace page, or your Facebook page, or anywhere. So it was basically a little scrolling self-advert showing off your photos. And eventually, we added things like photo effects, and stickers, and all the things that you see today in photo sharing software just 10 years earlier.

• 21:03Guy Raz?

  And by the way, at its peak, how many employees did you have at Slide?

• 21:06Speaker 01

  128, if I remember correctly.

• 21:09Guy Raz?

  And I mean, I think at one point, it was hitting like 150 million users a month.

• 21:15Speaker 01

  That's right. I remember noticing that we were something like the seventh-largest property on the web.

• 21:21Guy Raz?

  I'm curious, having gone from running PayPal, which was about, you know, financial transactions, to a really sort of much more consumer-facing site that was more about fun, right? Did you enjoy it? Did you, you know, did you find your passion for it?

• 21:40Speaker 01

  So the honest answer is, I loved the team that I built. But we had some pretty serious challenges throughout. There were multiple sort of realizations at my part that the culture wasn't going the way I wanted to. At one point, I had to ask a couple of people to leave because I thought they were just creating what is now called toxicity in the team, blowing the company up from within. And throughout the whole thing, I felt like a fraud. Like, I never played video games growing up. I was not really into photography. I was not a photo sharer. And so this idea of building our team and products was this sort of mascot to con. And in some ways, I was using my own product in real life. I was putting sort of a happy face sticker on my collection.

• 22:23Guy Raz?

  I mean, it's interesting because I would imagine that you were able to attract really great engineers and a great team because of your reputation. But what was, what were the problems that had begun to unfold?

• 22:37Speaker 01

  Probably the most important learning from the problems is that, this is going back all the way to PayPal, but PayPal was this unbelievably combative, kind of a truth-seeking, by any means necessary, almost, culture. And when I left, I thought to myself, you know, next time around, I wonder if we have to fight so much. Like, maybe it's better if we had a little bit more love all around. So as I was building Slide, I over-indexed on this idea of, hey, we really have to have just a lot more collegiality. And that works really well if you are doing great as a company. But inevitably, every company goes through ups and downs, and sometimes downs take a long time, and you go through to the pit of despair for a while.

• 23:23Speaker 01

  And in that moment is when all the veneer is stripped, you know, sort of all the superficial, such a nice guy, and you know, gosh, I just really enjoy spending my time with you, goes away because you start to ask yourself, whose fault is it? And why are we not doing well? And the professional emotion, if you will, you need at that time is respect for your partner's abilities. You don't actually need to feel like that person is an amazingly nice guy. The key thing is, I know you will be in your foxhole, holding your position, sort of almost like a military-level intensity. And as Slide started unraveling a little bit here and there, I noticed that there

• 24:05Speaker 01

  were all these people who were extremely loving towards one another that would, I would find out they didn't respect each other at all. And I sort of had to start asking the question, all right, well, if you don't respect this person professionally, one of you cannot be here.

• 24:19Guy Raz?

  But obviously, things are going well enough at Slide that, I mean, Google decides to buy it in 2010, I think for around $180 million, and you become a Google employee. But I'm assuming when you got there, you did not think you would be at Google for the rest of your career.

• 24:38Speaker 01

  I knew that I would leave and start another company at some point, but I certainly didn't enter the

• 24:45Speaker 01

  Campus thinking, hey, this is a very temporary thing. I was actually quite genuine. I'd never worked for anyone for more than a couple of months. And that was one time at eBay. And so I sort of thought, all the stress of being a founder, maybe I don't want it.

• 25:01Speaker 01

  It turned out I did.

• 25:02Guy Raz?

  You became a vice president of engineering at Google. I mean, it's a pretty important job.

• 25:10Guy Raz?

  How did you find the environment there? Did you find it liberating not to have to be awake at 3 a.m. stressing out? Or did you find it actually stifling?

• 25:21Speaker 01

  I think for a little while, I was suddenly worry free. But I found myself bumping into some of the corporate walls reasonably quickly. And by the way, I don't mean to sound like an advert, but there's lots of good things to say about Google. And none of it is in any way disingenuous. But for an entrepreneur, you get reminded you're an entrepreneur when you're not trying to run a company the most. You start realizing that rules are written and you kind of have to follow them because you're in someone else's backyard. And eventually I sort of said, look, I think I'm probably better off on the outside stressing at 3 o'clock in the morning.

• 26:03Guy Raz?

  I think you lasted at Google for about almost exactly a year from an August to an August.

• 26:08Speaker 01

  That's right. I actually knew a little bit earlier Sundar, who is now, of course, the CEO of the whole thing, was singularly the kindest person I met at Google. When I was sort of lost in the corporate wilderness there for a little while, he took me on walks and talked to me and let me sort of pour my confused heart out. And so as he was counseling me through what's really going on in your head, man, I pretty quickly, maybe six months in, figured out like this probably isn't going to work. And then I chatted to Larry and Sergey and they said, look, before you hang up your cleats, poke around at Google X, look at all the really amazing stuff we're doing. Like surely there's something intellectually interesting that he can try to find. And I did that for six months.

• 26:50Speaker 01

  I honestly looked for something cool and maybe more autonomous and independent that I could do.

• 26:55Guy Raz?

  Were they disappointed when you, I'm sure they were, when you said you were going to step down?

• 27:00Speaker 01

  Yeah, I don't think they were pleased.

• 27:03Guy Raz?

  Was that a hard conversation?

• 27:05Speaker 01

  Yeah, it was honest. I mean, I sort of said, look, I have a road I have to go find again.

• 27:11Guy Raz?

  Meantime, you leave Google in 2011, but there's other things going on in your life. I mean, for one thing, you're still very involved with Yelp. I think you'd become the chairman in 2012, but you still had that, the incubator, right?

• 27:28Speaker 01

  Yes, I kept my fingers involved in a fair number of pies and Yelp was certainly a very important one.

• 27:33Guy Raz?

  All right, so 2011, you are now, once again, out in the world, trying to figure out what you're going to do. And from what I understand, because the first time this happened, you really, it was a rough period, I mean, personally, because you were lost, you didn't really know what to do. Did you go back into a slump? I mean, this time it was different, you're married, you have kids, I think you had at least one kid at that point.

• 27:58Speaker 01

  We had the second one just as I was leaving Google. So this is the same wonderful Nellie, and now plus two kids, and a puppy. And my primary thought at the time was, hey, last time I ended up almost losing everything, so I am definitely going to go start some company or do something to keep my brain occupied. Otherwise, I run the risk of being told to move out again. And so I was actually very, very keen on finding something interesting. And in fact, I was literally talking to people to start brainstorming, maybe the day after I walked out of Mountain View for the last time.

• 28:38Speaker 01

  But I also decided I would take longer figuring out what I want to do, because throughout Slide for sure, and even throughout Google, Nellie would tell me, I know you're going to start a company, next time around, just sit back and ask yourself, what would make you happy? What is the thing that you're really meant to do?

• 28:59Guy Raz?

  And what was the kind of thing that made you happy, that you thought, I need to do?

• 29:06Speaker 01

  I didn't know. And most of 2012, I spent kind of brainstorming completely random ideas. But the probably most important output of that time, I wrote this essay for myself titled Hard, Valuable, Fun. Where I try to sort of explain what is it that drives me? Like, why do I do the things that I do in sort of this rigorous self-reflection process? And the very shorthand is it has to be difficult. I'm an engineer at heart. I like solving puzzles. And if it's not hard, I just don't really value it enough. And going all the way back to PayPal, one time I was working, you know, very late at night, I was working on some project outside of PayPal at the PayPal office.

• 29:50Speaker 01

  I was still kind of had enough time to tinker. Peter walked in and he asked me, what are you working on? And I'd sort of described whatever program I was trying to hack together. He said, that sounds really difficult. I said, yeah, it's really hard. But is it valuable? I said, how valuable? I don't know. I it's just really fun. He said, well, hard is not always valuable. Valuable is typically hard, but the inference doesn't work the other direction all the time. And it sort of really stuck with me like that is such an easy way of explaining why a lot of puzzles are kind of worthless. And so it's still important for me to build these really solve really hard problems, but they have to be valuable, sort of a nod to Peter Thiel. And then I said a whole paragraph on what is fun for Max?

• 30:35Speaker 01

  And I don't really think it's photo sharing and I don't think it's social games. That was sort of this moment of truth where I was like, oh, I know the class of companies I'm going to start. And then I showed it to Ellie and she said, you finally figure yourself out. And that was a liberating moment because I then said, well, it sure sounds like something in financial services again, but I'm definitely not going to do that. And she said, just give yourself permission to go build something that's like another PayPal, but better.

• 31:05Guy Raz?

  When we come back in just a moment, how Max starts to build a business that makes it easier to buy things on credit, a need he identifies after discovering that his own credit rating is pretty terrible. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 31:31Guy Raz?

  Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams, and businesses ship production-ready sites faster than ever while getting every detail right. Prompt, inspect, edit, and publish in one place at a whole new pace. AI agents and humans work together.

• 32:13Guy Raz?

  The agents bring speed and scale, and people bring taste, judgment, and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities, it's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on.

• 32:58Guy Raz?

  NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new expert-created business guide in your hands today. It's called "A Lining for the Agentic Era: How AI Is Changing Everyday Work." And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape Work across your entire organization and how to position your business to prosper from it.

• 33:43Guy Raz?

  If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built.

• 34:02Speaker 02

  Confidence. It's listening to your gut. It's moving forward even when the path ahead is unclear. For nearly 160 years, Pacific Life has helped people keep their promises, building confidence for generations. Whether you're confident in your financial future or just beginning to envision it, we're here to help. Ask a financial professional how. Pacific Life, the power of a promise. Pacific Life Insurance Company, Omaha, Nebraska. And in New York, Pacific Life and Annuity, Phoenix, Arizona.

• 34:38Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2012 and Max Levchin is hammering out an idea for a new fintech company. And he starts to formulate a plan around this very embarrassing thing that had happened just after he left PayPal. He was a multimillionaire at that point, and he decided to buy a new car.

• 35:00Speaker 01

  So I fly down to LA and try to buy this beautiful, one of the very first hardtop, fully retractable convertibles, which was probably my most coveted possession in my late twenties. And the dealership said, oh, you know, cool, you're the PayPal guy. Like, I saw you guys win public. You're still going to have to pay cash because your credit that I just checked is terrible. Like, I don't know what you did, but my God. And I'm standing there next to Nellie and next to Luke, one of our PayPal co-founders, and sort of my, I'm slowly shrinking and my face is probably purple with embarrassment. And it was not the only, in fact, it was one of many, many experiences where my credit would get checked and it would be this moment of like, oh, God, please, please don't say

• 35:43Speaker 01

  out loud that, you know, I came to the US as a 16-year-old until my first credit card on campus, which I promptly went delinquent on. I had no record at all. And, you know, I had no idea how minimum payments work in college and my FICO score went through the floor. And it's been a decade and I took a company public and it still doesn't matter. I still look like a deadbeat to the rest of the world because of my credit record.

• 36:04Guy Raz?

  So I guess you start to think about how to solve that kind of problem, like somehow sort of how to make it easier to presumably to buy things on credit or to build up a like a good credit record.

• 36:16Speaker 01

  Yes. As we were brainstorming ideas, the first filter I would apply is what is sort of gut wrenchingly difficult? You know, a real problem in the world that people are willing to go to the ends of earth to figure out. And I was chatting with Nathan, one of my closest friends from college days, who was my head of risk at PayPal. He went on to co-found Palantir.

• 36:41Guy Raz?

  With Peter Thiel, yeah.

• 36:42Speaker 01

  And I said, I know credit scoring is such a gnarly problem. I still brace for impact every time I hand my credit card over because who knows, they might cut it up and bring it to me in two pieces because my credit is so bad. And Nathan said, you know, what's really stupid is that at PayPal, we had access to all this amazing purchasing data. We never once tried to use it for credit scoring. We did so well with anti-fraud and all this data-driven risk decisioning. But credit is kind of the granddaddy of them all. And it's actually sort of the consumer-facing part of risk decisioning. Can you and will you pay your bill if I gave you money upfront and asked for it back later? And it was sort of this like, oh, that's really hard.

• 37:26Speaker 01

  There's a lot of people like me who screwed up in college and probably would like to buy things using credit, but are either priced out or have these horrendous triple-digit rates they have to deal with. And it seems to be kind of stuck in 1970s. And so that was the that was the jump off point and we went to work feverishly.

• 37:43Guy Raz?

  So you you started to ask yourself, can I solve this problem? Right? Maybe there's a way to create some kind of of mechanism to evaluate consumers.

• 37:56Guy Raz?

  In a different way?

• 37:57Speaker 01

  That's right. And this idea that there must be other forms of figuring out what you really are like as a financial actor beyond your 10-year-old college record or lack thereof. And then fairly quickly, we realized that fundamentally, what people really want is not some abstract better credit score. They want to buy things. They don't want to be confused and they don't want to be scared by the cost if they're paying overtime.

• 38:25Guy Raz?

  All right. So you you start to ask yourself, how do we solve this? And how do you solve it? I mean, I mean, banks, you know, and lenders have a system. They they evaluate your credit score based on a variety of factors, whether you pay your your bills late. You know, if you if you've missed a rental payment or a mortgage payment or. And that's basically how they figure out whether you are going to predictably pay them back. And and that has more or less worked for banks, not not great for consumers. But there's a reason why that works because it's risky to lend money, presumably. So how are you going to solve that?

• 39:01Speaker 01

  The short answer is there's no short answer. The the most important thing we realized very early on was the problem isn't so much with a credit score. Oh, there's plenty to improve there on. But with the tools available to consumers to borrow money. This will sound harsh, but I I genuinely believe what I'm about to say. So payday lending is a well-understood awful thing where you have very high rate compounding of interest into principal and ability to extend your payment period essentially arbitrarily, so long as you're here to kind of feed chunks of money to the lender. You know, that's the anathema, that that's the worst thing in the world. That's the payday lending.

• 39:43Speaker 01

  Now, reduce the rate by, let's say, one zero, and you're you're describing a credit card. The two products are basically identical. You can revolve more or less in perpetuity. The rate's lower, so it looks a little bit nicer, but it's still an exponential curve. And the most common way to borrow money in America is a credit card.

• 40:02Guy Raz?

  Yeah.

• 40:02Speaker 01

  So one of the key insights for our firm was Gen Z and millennial generations, which are now make up more than, I think, half of American spenders. Are starting to actively ask the question, is this the best way? And the fairly loud answer is no, it's not. It's a lot nicer to say, hey, I'm going to borrow X dollars. It will cost me additional Y dollars. Or maybe it'll cost me nothing because the merchant that really wants me to buy whatever the thing that I'm trying to buy is prepared to pay my interest for me. So maybe there's really no upcharge, no, no interest. And that's it. And then I know that after six payments or 12 payments or 18 payments, whatever the good number is for me, I am done.

• 40:44Speaker 01

  And if I'm late, there's not going to be gotcha like, ha, late fees. So we'd said like, let's not do late fees and let's not compound interest into principal and sort of just stripped out all the payday lending like yuck from payments.

• 41:01Guy Raz?

  So, all right, just to explain, what, what you're describing is, is known as BNPL, which is buy now, pay later, right? And, and, and the company you've launched, Affirm, is one of several companies in this space right now.

• 41:15Speaker 01

  That's right.

• 41:15Guy Raz?

  All right, but, but anyway, in the case of Affirm, I guess, I guess the way it works is you make these short-term loans to consumers. And there's no compounded interest and, and no late fees. And, and I guess when you launched, you were trying to be like an alternative to, to normal credit cards, right?

• 41:35Speaker 01

  Yeah. Big part of credit cards is that there's some gargantuan limit and, you know, you're encouraged to fill up your bucket of debt and never really fully empty it. The product we built was all about, hey, borrow a hundred dollars, pay it back in six weeks, be done. If you need to borrow another hundred, let's have that conversation separately. And it might unfortunately result in us telling you, we don't think you can take on another hundred dollars.

• 41:58Guy Raz?

  Hmm. And as I, as I understand it, right, from, from looking at it, the loans can work in different ways, right? Like you guys do some loans where the customer does pay some interest. And then there are other loans where the customer doesn't pay any interest at all. Like, like basically if you bought a hundred dollar pair of sneakers. You would just pay it in four installments of 25 bucks. But what I wonder is, how do you assess risk? Right? Because like when I go for a home loan, they look at my, my records and my scores. And but when you're just looking at a random new customer, how do you assess whether they're going to pay a loan back?

• 42:35Speaker 01

  You know, it's not that different from getting a rate for a mortgage, except we do it in a matter of seconds.

• 42:42Guy Raz?

  And you use different data points?

• 42:44Speaker 01

  So we don't look at traditional credit scores since, you know, we founded the company with a belief that we can do much better. But we do look at the data that goes into that score. In some ways, we can think of us almost like computing a different score using much of the same data, plus a bunch of other data.

• 42:59Guy Raz?

  Right.

• 43:00Speaker 01

  Sort of at the limit, we literally say, hey, we can't figure out how to reason about your financial situation. Like, maybe you are, you know, what's called a thin file where your information is there, but it's just not enough of it. Would you please log into your bank account right now? We'll look at your cash flow and we'll actually decide whether we think you can carry this amount as a monthly obligation and we'll honestly tell you. And obviously it has to happen fully automatically. No human can look at a data and calculate it quickly enough.

• 43:30Guy Raz?

  Okay, so essentially, you're, you're basically using artificial intelligence to, to underwrite pretty much every loan you do. But like, when you were pitching this model to investors, did, did they believe that that approach was good enough to, to mitigate the risk? That, you know, that you'd make such smart lending decisions that you wouldn't need to charge late fees or things like that?

• 43:54Speaker 01

  You're absolutely right. Every investor I talked to, and for a while, I'd sort of funded it myself because I've been fortunate and people didn't really believe that this is possible. But every time someone would ask me, like, how in the world are you going to do this without late fees, without deferred interest, without all the sort of natural, the quote unquote, natural?

• 44:10Guy Raz?

  Yeah.

• 44:11Speaker 01

  I'd said, look, I think we're going to lose a lot less money because vast majority of people are going to pay us back.

• 44:20Guy Raz?

  But if there's no late fees, right? And you don't, it's just a straight, you know, four payments. What's the disincentive to, to just not pay on time?

• 44:33Speaker 01

  Well, for one, if you're a delinquent, you can't transact again. If you are what's in the industry is evocatively called a sloppy payer, which is someone who generally pays their bills but are almost never on time. The normal financial industry behaviors say, great, you're a fantastic revenue opportunity. You have the money, you just don't don't care about being on time and we'll charge you a fee for that. And so instead of doing that, we basically said, look, we will go out of our way to remind you and remind and remind you, we'll send you multiple notifications through multiple channels, through our app, through a text, through an email. And we'll also give you an opportunity to set up a fully automatic kind of a timed withdrawal from your bank, just so you're not late.

• 45:16Speaker 01

  And for a vast majority of people, this is more than enough and that they are on time. But if something happens and you're unable to make the next payment, that's fine. But that prevents you, generally speaking, from transacting again until your current, or at least until we understand what's really going on.

• 45:32Guy Raz?

  All right, I want to I want to dig into this from the merchant's perspective. Because from what I understand, when a consumer makes a transaction with a firm, the merchant pays a fee, right? Like, I mean, whether it's a 0% loan or even a loan with interest, the merchant is assuming some of that cost, right? So so why would they even go for that? Like, what what's in it for the merchant?

• 45:54Speaker 01

  The reason the merchant finds that compelling is because without a firm, this transaction most likely would not have happened.

• 46:01Guy Raz?

  Because the consumer might not have a credit card.

• 46:02Speaker 01

  Yeah, or chose not to do it. About half of the United States adults are revolving on their credit card right now. And revolving is expensive and it gives you extreme anxiety if you're revolving for a long time on a lot of money. And so putting more onto your credit card for those people is a very, very stressful event. And the choice they have is, well, I'll buy it anyway, you know, damn the interest rate. Or, you know what, I'm not going to buy it. A firm being the third choice was a really powerful enabler. People said, OK, so I can buy this thing. I will pay no interest or some number of dollars on top of the retail price. But then I'm entirely out of debt for this thing in six months or six weeks. That seems like a pretty clear value proposition.

• 46:44Guy Raz?

  So, all right, so in 2012, once you set out to launch this thing, how did you find customers to who would be comfortable using it?

• 46:55Speaker 01

  We were looking for a hack, basically a trick to. Get consumers who are interested in borrowing money to pay for things over time without having to spend marketing dollars. And so we had a couple of friends that were in e-commerce and literally called around and said, hey, would you consider putting up pay with Affirm right next to your pay with Visa and pay with MasterCard? We think there's a whole world out there that doesn't have access to Visa and MasterCard that probably would use us or nothing. And then the sort of the wow moment was when one of them called me back and said, all right, we just saw a 30% spike in volume as soon as we added your button.

• 47:35Guy Raz?

  When we come back in just a moment, how Max gets merchants to use his brand new payment platform and why he's spent way longer working at Affirm than at any other job he's ever had. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 48:00Speaker 03

  They're running a cover two defense. But you're running to get game day deals on Uber Eats. Keep everyone at tonight's watch party fed with deals from your go-to restaurants or stock up with deals on your favorite snacks and groceries. Whatever the occasion, get game day deals on Uber Eats all season long. It's not football without food. Uber Eats. Order now. Terms apply. Product availability varies by region. See app for details.

• 48:37Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2012, 2013, and Max has launched this new company, Affirm, a buy now, pay later service that simplifies the experience of buying on credit. And at this point, he's looking for some merchants who will sign on to the plan.

• 48:57Speaker 01

  The very first one you would have heard of is 1-800-FLOWERS. It was actually a fascinating conversation where I talked to a To founder CEO there and 1800 Flowers has been around for quite some time, obviously. And I thought this would be a, what in the world are you talking about? And he actually said, oh, my God, like, this is, you know, very similar to what we used to do in the 70s where people would call us on the phone and order. And they'd say, oh, you know, I don't have the money right now. I'd like to pay later. It would say, oh, no problem, you know, just put right down a phone number, of course. And then come back and bill them later. Yeah. Well, layaway, but you get the flowers today. And so kind of a layaway with a instant delivery.

• 49:38Guy Raz?

  Yeah.

• 49:38Speaker 01

  But he grasped the idea instantaneously. He's like, yeah, this is great. Let's give it a test. And so it was probably the easiest sale I've ever closed. And having a brand name merchant was a huge enabler. It literally allowed us to say, hey, you know what? It worked for them. They're a referenceable customer. That's when I started knocking on much sort of a larger doors, if you will.

• 49:59Guy Raz?

  And then who was, who were the next ones? So what were the next dominos to fall, so to speak?

• 50:04Speaker 01

  So the next set that we were unbelievably lucky to get were a lot of the online, kind of a new direct to consumer sellers of homewares and home workout equipment, like Peloton revolutionized home workouts. And Casper just completely rewrote the rules on mattress replacement cycle and how you sell, how you deliver it. And so all of these brands were kind of being born in the early teens, you know, the last decade. And we were able to sign up an incredible number of them very, very quickly during 2014, 15.

• 50:40Guy Raz?

  So I wonder when you, when you got this together and launched in 2014? I mean, did you have to bring in a lot of money? Did you have to have a lot of cash on hand? Or was all, were all of these sort of the interest payments essentially paid by the retailers? And, you know, and then in some cases, the actual consumer? You guys never, a firm never had to pay any of those fees?

• 51:05Speaker 01

  Oh, no, we certainly, we certainly did. So when we launched a product, you know, just the very, very first launch with 1800. So the way the product was just from a cash flow perspective, as long as you're growing, it's a negative cash flow product. You approve a consumer, they get their flowers. You send money minus fees to 1800 Flowers. The consumer pays you back. First payment is due, let's say, 34 days from the transaction. So for those 34 days, you've already paid your retail partners. And you're waiting for consumers to come back and pay you. So at any given time, you are waiting for money to come back. And you need to continuously get more capital to grow the company.

• 51:43Guy Raz?

  So essentially, you had to have the money and have to have the money to pay the, you know, the full amount to the retailer minus your fee that they're going to pay you. And then you get the money directly from the consumer.

• 51:57Speaker 01

  Yes. So the day we launched, I sort of said, well, we have no way of financing these loans, and it's going to be a negative cash flow business. And so I will put up $100,000 of my own money to front these payments. And if there's any uptake at all, we're going to have to figure out how to scale some sort of a capital program. And I went through a sleepless night thinking, oh, my God, this thing launches and everybody wants it. And my $100,000 will run out. And what do I do then? So I actually had this moment of angst, like, you know, asking Nellie, like, how much more should the Lefshon family be willing to put up? And of course, it launched and nobody cared. True, true revelation from the world of startup.

• 52:43Speaker 01

  Very, very rarely does a product launch immediately have the sort of effect of an explosion. Just typically, things don't work.

• 52:51Guy Raz?

  It was crickets. Nobody, nobody, nobody showed up on day one.

• 52:54Speaker 01

  Exactly. So we had to learn how to promote it a little bit, how to work with one hundred flowers to tell consumers as they're considering their choices and bouquets, that there's in fact, a way to pay overtime is available later. But as we started seeing transactions, very quickly, we had to figure out how to fund the actual loan flow. And the way that works, first, you borrow money so you can lend it. You go to bank partners, non-bank partners, and say, hey, here's my, the financial profile of my product. I would like to borrow from you. And obviously, I want to pay a lower interest rate that I think is fair to charge the consumer or the merchant on the other side. And the spread will be my fee. And you can imagine scaling that program to larger and larger and larger. And eventually, you effectively issue bonds and those become tradable.

• 53:41Guy Raz?

  So how fast did it, I mean, did you feel like a firm, once you got through that initial period with 1,800 flowers, how quickly before you convinced other big retailers? Because now it's pretty much everywhere. I think it's on Amazon now, right?

• 53:58Speaker 01

  It is on Amazon. The first major break retailer for us was Walmart. And it took a long time and I got to know some of the folks in senior management team there. And the thing that was pretty amazing is how similar their thought process was about the good and the not so good of the financial products. I was struck by just how aware they are of their customer and how these financial products can be really harmful. And so we had a meeting of minds long before we were official financial partners.

• 54:32Guy Raz?

  One of the things that's been really interesting about a firm is, and it sounds like you very intentionally thought of Gen Z millennials as your consumer base, right? Is it fair to say?

• 54:48Speaker 01

  There's a fair amount of Gen X as well, but it definitely skews very young.

• 54:53Guy Raz?

  I was looking at some just kind of broad data around a firm and it has a very high use rate among people of color. And I mean, this is obviously always sensitive to talk about, but from what I understand, it's been particularly among black consumers has been very welcome. I mean, it's a fact that credit ratings can disproportionately negatively affect people of color in the United States. And payday lenders in particular have been particularly predatory in underserved communities. So yeah, I mean, this is an option for lots of people who didn't have another option before.

• 55:36Speaker 01

  That's right. It is a natural consequence that we don't look at traditional credit scores and traditional credit data as much. There's plenty of great people across many, many underrepresented groups. And by great, I'm not passing character judgment here, of course, but financially solid footing enough to borrow money and pay it back successfully without the needs for the nasty alternatives. And if you treat them right, they tell their friends, which is true for I think any of us. And therefore, these products take off because of their honesty and transparency that we bring to bear. And so I, you know, I would lie if I said it doesn't make me happy.

• 56:14Guy Raz?

  You know, Max, it's interesting. I mean, a firm is, it's a, it's a math problem, right, that you're solving here? Because I'm assuming that you're looking at the math, and a firm is a public company. And so it's, you know, all your financials are open, and it's not yet profitable. But you know, looking at the math, where it's headed?

• 56:37Speaker 01

  Yes.

• 56:38Guy Raz?

  Is that, is that true?

• 56:39Speaker 01

  Yes. The probably most important thing about a firm is exactly what you just said. It is a really, really, really cool, big math problem that we're solving. If you look at the unit economics, which is what happens to every transaction, if you divided the overall dollars in by the total number of dollars transacted, you'll see that that number is very positive. And so over time, so long as we don't spend the excess transactional economics, we'll sort of inherently become profitable. And it is something that we can model and can see in, in our future. Because we're a public company, I will stop short

• 57:20Speaker 01

  of prognosticating what that immediate future, not so immediate future is, but it is, it is exactly that.

• 57:26Guy Raz?

  Which I guess leads me to my next question, which is, running a public company is very different, because you are now quarterly earnings reports, and you know, you've got to answer questions from the media and from shareholders. But, you know, over the last year, your, the stock price has gone from 176 down to, you know, in the low 30s. Does that, does that keep you up at night? Or are you confident enough in the math that you're not worried?

• 57:55Speaker 01

  I'm not worried. I am very confident in the math. That's probably the thing that I'm most confident in, in, in most, most worlds. The stock price matters for two really important reasons. There are two constituents. So there are people who bought the stock, one, it was higher than it is right now. And it is my job to try the absolute hardest I have to make sure that they don't feel that they made a mistake. I think the company is in exceptional shape. And so my duty to my shareholders is not lost on me, but the way to do it, of course, is to build a great company over a long period of time. And so the fluctuations of the stock today or tomorrow

• 58:38Speaker 01

  is something that I don't really look at, to be completely honest. The second group that I really care about is the employees. And for them, the mission is truly important, but they have choices in their employment. And I need them to believe and I need them to be here and continue building things with, you know, all of us together. And so the stock price matters as a indicator of value that we have created for the personal finances of our employees. So that that's really important, which is why I care about the stock price, but I care more about building something that five years from now is 10 times more successful financially than we are today. You know, there's a great, I think,

• 59:21Speaker 01

  Graham quote, in a short term, the market is a voting machine and in the long term, it's a weighing machine. And I like that thinking process.

• 59:29Guy Raz?

  Max, you've been working on a firm now for 10 years. This is the longest you've been at one job.

• 59:36Speaker 01

  Yeah.

• 59:37Guy Raz?

  Right? In your, in your entire career, 10 years.

• 59:40Speaker 01

  By a wide margin, too. Yeah.

• 59:42Guy Raz?

  Yeah. I mean, if I, if I'm looking at you, I'm thinking, based on his record, he's, he's restless. He's, he's, he's, he's got to find some new challenge. He's gonna, he's got to, just to live, to survive, to thrive, to be happy. He's gonna have to come up with something new. Is that true?

• 1:00:02Speaker 01

  A little bit in the following sense. So I mean, this, this sounds weird and to some people presumably extremely prosaic, but financial products is like a playland for me. I feel embarrassed saying that out loud, I guess, but. The ideas that are sloshing around in my head, the things that need to get built, needs to get built tomorrow, most of them these days are really in financial services because everywhere I look, every sort of rock we turn over as we run a firm, there's like, oh my God, that clearly needs to get reinvented and done better. And so the opportunities that I see these days are just predominantly in my own industry.

• 1:00:43Speaker 01

  So how do I stay fully engaged and fresh at a firm if I really am going to sell shares to the public and commit to them, which I certainly have, that I'll be here a long time. So we'd organized in some ways sort of the incubator 3.0 inside a firm. And there's a team called ZTS, Zero to Sixty. Fortunately, not just me, but a bunch of other pretty smart people who are constantly coming up with ideas that we're incubating inside a firm and launching. And the way I describe it to my investors, if you look at any successful startup, not just a firm, it's always a S-shaped curve where you start with nothing and for a while it's just nothing and nothing and nothing. And then something

• 1:01:24Speaker 01

  clicks and then it goes vertical and you just keep going up and up and up. And then eventually it has to slow down as you saturate the market, as the market becomes more and more competitive, as consumer preferences change. Businesses don't go away, but the growth curve slows. And we're lucky to have hit on a giant opportunity in a giant market. So a firm as it exists today is very far from asymptoting and turning into an S-shaped curve. But if I'm going to be here 10 years from now, I'm going to be here 20 years from now, I better have another S-curve type product in my pocket. And so a lot of what I work on these days, sort of what gives me greatest happiness really is experimenting

• 1:02:06Speaker 01

  within the ZTS team, building new ideas. And most of them are going to go exactly the way of the dodo as any other startups. But even if one of them becomes another S-curve, that propels a firm to the next big thing, its purpose will be fulfilled. So I'm pretty sure I'm exactly where I need to be, or quite sure I'm exactly where I need to be. So I'm not, in fact, restless. The restlessness comes from

• 1:02:31Speaker 01

  Gosh, I have to do another really, really important management meeting and that druther tinker was ETS.

• 1:02:37Guy Raz?

  I've been thinking a lot about the story you told of when you met Peter Thiel. You went to this lecture that he gave in front of four or five people. And I think that was a very lucky moment for him. And I think it was a very lucky moment for you, too. And I think both of you, had you not met, would have figured something out and been successful. You were motivated. You came out there and you were clearly a talented computer programmer and mathematician. So there's no doubt that you would have figured it out. But you did have those moments, like going to that lecture at Stanford and eventually being part of PayPal, which is the kind of the history of Web 2.0.

• 1:03:19Guy Raz?

  I mean, all those people who came out of PayPal are hugely influential, hugely powerful, for better or worse. How much of your journey and what happened to you, do you attribute to those lucky moments? And how much do you think have to do with just how hard you work and the grind and in your intelligence?

• 1:03:45Speaker 01

  It's a great question. I've heard you ask this before and I thought, what is my answer? And came up with very little canned anything. You know, I think the role of luck is vastly underappreciated. I think the action you take when an opportunity appears is yours and it's the choice and willingness to take the risk and decision to just go for it and sort of damn torpedo's sort of moment. But if you are unwilling to move or unable to recognize or don't encounter these moments

• 1:04:28Speaker 01

  of opportunity, you know, it's probably not available to you. And I feel a certain degree of guilt that some brilliant people I know may not have had some of these moments and they could have been much more successful than they are. Yet I do think that probably moments of luck appear in front of most of us at some point or another in our lives. And what do you do after, once you see one of those, have one of those? It does come down to work ethic and just willingness to grind and, you know, sleep less and compromise things like work-life balance, which have their own consequences. It's not free and it can be very damaging. But luck is the kickstart.

• 1:05:14Guy Raz?

  That's Max Levchin, founder and CEO of Affirm and co-founder of PayPal. By the way, whenever you're asked to verify you're not a robot online by trying to figure out what those wiggly letters spell, you could be taking the Gauss Beck-Levchin test. Only a human has the ability to discern those letters. Max created that test after PayPal was getting hammered by hackers. That was back in 2002, and the test, in modified form, is still widely used across the internet.

• 1:05:48Guy Raz?

  Hey, thanks so much for listening to the show this week. If you want to contact the team, our email address is [email protected]. If you want to follow us on Twitter, our account is @howibuiltthis and mine is @guyraz. And on Instagram, I'm @guy.raz. This episode was produced by Alex Chung with music composed by Ramtin Arablouei. It was edited by Niva Grant with research help from Claire Murashima. Our production staff also includes J.C. Howard, Casey Herman, Josh Lash, Liz Metzger, Kerry Thompson, Sam Paulson, Catherine Seifer, Elaine Coats, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.